New research from the Prudential reveals that almost 20 per cent of people planning to retire next year will do so with debts averaging £31,200.
This is substantially lower than the debt figure of £38,200 seen in 2012, helped by a reduction in the amount of debt owed by men.
The Prudential says that the drop in debt is good news for people retiring with the average monthly debt repayment dropping to £215 from £257 in 2012 but warns that 22 per cent of people retiring in 2013 will still have to make debt repayment of £400 or more each month.
Vince Smith-Hughes, Prudential’s retirement income expert, said: “The fall in average debt owed by this year’s retirees is a welcome sign that people are paying off some of the money they owe before they stop working.
There has been a change in the type of debt owed with a larger emphasis on unsecured borrowing with 56 per cent of people owing money on credit cards and just 43 per cent with mortgage debt, down from 50 per cent last year. 21 per cent have bank loans and 19 per cent have overdrafts, up from 13 per cent in 2012.
Its class of 2013 research looks at the plans and expectations of people planning to retire in the year ahead. This year it reveals that average debts held by the class of 2013 approaching retirement has fallen by almost 20 per cent, from £38,200 to £31,200.
The average debt owed by men fell dramatically from £45,300 in 2012 to £33,800 this year, for women debt fell from £29,400 to £28,100. The Prudential says that 20 per cent of men will enter retirement in debt compared to just 16 per cent of women.
There are regional differences with 26 per cent of new retirees from ales holding debt when they retire compared to just 13 per cent from Yorkshire and Humberside.
On average people retiring with debts expect it to take four years to clear the debts. 33 per cent expect to pay off what they owe within two years whilst 12 per cent don’t ever expect to be debt-free.
Vince Smith-Hughes said: “But when people’s finances are still under pressure, with expected retirement incomes at a six-year low according to our Class of 2013 study, it’s important to ensure debt repayments do not eat into retirement incomes too much or for too long. Paying off debt as early as possible – preferably while still working – will help to ensure that retirees have more disposal income, in turn enabling them to enjoy a more comfortable retirement.”